Opinions on Auckland

Hi Adrian! I used to live in Auckland but have been in Melbourne for 12 years. While there I managed to build up a portfolio of 6 dwellings on 4 titles between 2002 and 2004, mostly in West Auckland. At one point I had a gross yield of 9.6% on a dual income property in Henderson that was positively geared, despite interest rates going over 10% back then. I have since divested my entire Auckland portfolio, for a number of reasons, with the last one going earlier this year for what I thought was an eye watering price.

Auckland on some measures is currently considered the most expensive real estate in the world, comparative to incomes. I think I read recently the ratio of median to income is over 10 now!! The NZ government and financial regulators have imposed all sorts of restrictions on the market but it has gone up by some 70% in the last 3-4 years. Affordability is a major issue and it is a hot topic all over the place. The Auckland council has just signed off on a unitary plan that sets out development rules for the next few decades.

There is no reason for the market to suddenly crash, it is being held up by unusually low interest rates with signs of further reductions from the RBNZ to support inflation. The thoughts are that when the interest rate cycle turns up there will be a correction, but that keeps getting pushed out. Meanwhile house prices continue to march onwards and get stretched from traditional valuations. I read a great article the other day on how much interest rates were affecting the market vs all the current talk of overseas investment, undersupply of new builds etc… sound familiar?

Here is the article..
http://www.goodreturns.co.nz/article/976504729/the-affordability-of-unaffordable-homes.html

Cheers,
Simon